Jobless Rate Rises To 4.3% / 86,000 payroll jobs vanish in March

Sam Zuckerman, Chronicle Economics Writer

Published 4:00 am, Saturday, April 7, 2001

The sputtering economy whacked the job market in March, wiping out more payroll positions than in any month since November 1991, as the slowdown spread from manufacturing to such services as restaurants and retail trade.

The nation's unemployment rate ticked up 0.1 percentage point to 4.3 percent, its highest level since July 1999, the Labor Department reported yesterday. More disturbing, economists said, was a drop of 86,000 payroll jobs,

the largest monthly decline in nearly a decade.

"The economy is just barely treading water," said Mark Zandi, chief economist at Economy.com, a Pennsylvania Web site and consulting firm. "If we're not in a recession, we're pretty close."

Here's Why You See Sonic Ads When There Isn't A Location In Your StateWochit

Watch: ‘Flying motorcycle’ is put through its paces in RussiaEuronews_News

Netflix and fly: Soon it’ll be easier to binge while flyingWibbitz

Tough Mudder Wants to Give You a Better, Cheaper WorkoutFortuneTime

The government didn't break out job data by region. But economists say the Bay Area is being hit especially hard as technology companies watch their customers cancel orders and their businesses fall through the floor. Unemployment in the region, currently far below the national rate, could reach parity, they predict.

Just this week, a slew of formerly high-flying Internet software companies, including Mountain View's Ariba, Foster City's Inktomi and Redwood City's Broadvision, disclosed plans to shed hundreds of workers, cuts that weren't included in the March employment numbers.

The abrupt unraveling of the labor market is spooking Bay Area residents, who less than a year ago were living in a job hunter's paradise where virtually anyone with a pulse could find work.

San Francisco resident Grace Bae, 28, lost her job last fall at an online advertising company. She hasn't landed a full-time position yet and has turned to freelancing.

"Advertising is the first thing that gets cut," she said. "I know a lot of people are looking."

Wall Street, which was looking for a small uptick in payroll jobs, unloaded stocks on news of the unexpected drop. The technology-heavy Nasdaq composite index fell 64.64 to 1,720.36, a decline of nearly 4 percent. The Dow Jones industrial average was off 126.96 to 9,791.09.

Because businesses are relatively slow to fire and slow to hire, the unemployment rate generally doesn't climb until a downturn is well under way. And the rate doesn't usually turn around again until a recovery is firmly in place. That means the job cut wave probably won't crest for months to come, economists predict.

"Things could get worse before they get better," said Rick MacDonald, senior economist with the Belmont office of the investment research firm Standard & Poor's. "We'll see a rate above 5 percent by sometime in the third quarter of the year."

The Labor Department's March data were especially dismal for black workers, whose jobless rate rose 1.1 percentage points to 8.6 percent. The African American unemployment rate dropped dramatically during the nation's long economic expansion. The latest data suggest those gains could be eroding quickly.

In a new development, the service sector significantly weakened in March. Until now, services have been mostly immune to the slump that has plagued companies that make high-tech equipment and big-ticket items, such as cars and trucks.

"Most of the economy's problems had been isolated in manufacturing," said Zandi. "Now it's beginning to affect demand for services."

Within the service sector, department stores, auto dealers and service stations lost jobs. One of the biggest declines was registered by bars and restaurants, where employment fell by 25,000 during the month.

In the Bay Area, restaurants are losing business as people cut back on eating out. That's dragging down demand for workers.

"In comparison with last year, it's almost 180 degrees," said Joshua Siegel,

president of Top of the Line Cooks, a San Francisco job placement agency for cooks and chefs. "I'm getting much fewer job orders, and I'm also seeing more applicants come my way."

Nationwide, the economic slowdown has taken a big toll on the temporary staffing industry, which has lost 273,000 jobs during the past six months. Kelly Services, a $4.5 billion temporary staffing company headquartered in Michigan, recently warned investors that its profits could be cut in half in 2001.

"We're the first to fall over when the oxygen is sucked out of the mine," said Carl Camden, the company's chief operating officer. "When business slows, temporary employees often experience the cuts first."

Latest from the SFGATE homepage:

Click below for the top news from around the Bay Area and beyond. Sign up for our newsletters to be the first to learn about breaking news and more. Go to 'Sign In' and 'Manage Profile' at the top of the page.